Formula
How to Calculate EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization — a proxy for operating cash flow and profitability, especially relevant for growth equity and PE deals.
Earnings Before Interest, Taxes, Depreciation & Amortization
EBITDA = Revenue - COGS - Operating Expenses + D&A
Where
- Revenue
- = Total revenue
- COGS
- = Cost of Goods Sold
- D&A
- = Depreciation and Amortization (added back)
What Is EBITDA?
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a measure of a company's core operational profitability. By stripping out interest, taxes, and non-cash items (depreciation, amortization), EBITDA approximates cash generated from operations before capital structure and accounting decisions. For early-stage VC companies, EBITDA is often negative (they're intentionally burning cash to grow). EBITDA becomes more relevant at growth equity and private equity stages, where investors pay EBITDA multiples to value mature companies. In the Rule of 40 framework for SaaS, EBITDA margin is one of the two inputs alongside revenue growth rate.
Related Terms
Frequently Asked Questions
How do you calculate EBITDA?
EBITDA is calculated using the formula: EBITDA = Revenue - COGS - Operating Expenses + D&A. Earnings Before Interest, Taxes, Depreciation, and Amortization — a proxy for operating cash flow and profitability, especially relevant for growth equity and PE deals.
What is a good EBITDA?
What constitutes a "good" EBITDA depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.